ASEAN states continue to offer opportunities

Machinery exports to South East Asia are increasing, but growth by competitors from China and Korea is significantly stronger

@ VDMA 2017

The South East Asian economic area experienced a remarkable economic development in the past 50 years since the foundation of the ASEAN state union. International machinery exports in this region currently total EUR 85 billion per year – nearly 200 percent higher than just ten years ago. Counties such as Vietnam, Indonesia or Malaysia are now among the world’s most dynamic economies and are becoming more attractive as sales markets and investment location.

Thanks to growing exports, mechanical engineering companies in Germany benefited from the upswing in the ASEAN region (Brunei, Indonesia, Cambodia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam) in the past ten years. From 2007 to 2016, the value of German machinery exports increased from EUR 3.4 to EUR 5.0 billion. A positive rise in exports of nearly 12 percent to EUR 1.2 billion compared to previous year’s levels was achieved in the first quarter 2017.

"Due to the increasing prosperity and growing population in these countries, the German mechanical engineering companies are well advised to place more focus on this region."“The companies have by no means exhausted their sales potential,” explains VDMA Chief Economist Dr. Ralph Wiechers. The demand for machinery in South East Asia has grown faster than the machinery exports from Germany. In 2006, the ASEAN states purchased 9.2 percent of their machinery imports from Germany. In 2016, it was only 5.7 percent. Japan and the USA, former market leaders in this region, suffered even stronger losses: Japan decreased from 28.7 percent to currently 16.8 percent, and the USA from 13.4 percent to 7.1 percent.

China is now the largest supplier of machinery in this region by far (25.4 percent). South Korea (7.1 percent) and Singapore (10.1 percent) also increased their deliveries in recent years. “The ASEAN states pose a challenge to German companies because each country has to be treated and approached as a single market. Due to the increasing prosperity and growing population in these countries, the German mechanical engineering companies are well advised to place more focus on this region,” Wiechers concludes.

The ASEAN state union was founded in August 1967, encompassing five countries: Indonesia, Malaysia, Philippines, Singapore and Thailand. At the time, mechanical engineering companies from Germany exported goods worth 249 million deutsche mark to this region. At that time, the total share of exports of the German mechanical engineering totaled 1.3 percent; last year it was 3.2 percent.